PART II. CONTRACTS

§921. Restraint of business prohibited; restraint on forum prohibited; competing business; contracts against engaging in; provisions for

            A.(1) Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void. However, every contract or agreement, or provision thereof, which meets the exceptions as provided in this Section, shall be enforceable.

            (2) The provisions of every employment contract or agreement, or provisions thereof, by which any foreign or domestic employer or any other person or entity includes a choice of forum clause or choice of law clause in an employee's contract of employment or collective bargaining agreement, or attempts to enforce either a choice of forum clause or choice of law clause in any civil or administrative action involving an employee, shall be null and void except where the choice of forum clause or choice of law clause is expressly, knowingly, and voluntarily agreed to and ratified by the employee after the occurrence of the incident which is the subject of the civil or administrative action.

            B. Any person, including a corporation and the individual shareholders of such corporation, who sells the goodwill of a business may agree with the buyer that the seller or other interested party in the transaction, will refrain from carrying on or engaging in a business similar to the business being sold or from soliciting customers of the business being sold within a specified parish or parishes, or municipality or municipalities, or parts thereof, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, not to exceed a period of two years from the date of sale.

            C. Any person, including a corporation and the individual shareholders of such corporation, who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment. An independent contractor, whose work is performed pursuant to a written contract, may enter into an agreement to refrain from carrying on or engaging in a business similar to the business of the person with whom the independent contractor has contracted, on the same basis as if the independent contractor were an employee, for a period not to exceed two years from the date of the last work performed under the written contract.

            D. For the purposes of Subsections B, C, E, F, J, K, and L of this Section, a person who becomes employed by a competing business, regardless of whether or not that person is an owner or equity interest holder of that competing business, may be deemed to be carrying on or engaging in a business similar to that of the party having a contractual right to prevent that person from competing.

            E. Upon or in anticipation of a dissolution of the partnership, the partnership and the individual partners, including a corporation and the individual shareholders if the corporation is a partner, may agree that the partners shall refrain from carrying on or engaging in a similar business within the same parish or parishes, or municipality or municipalities, or within specified parts thereof, where the partnership business has been transacted, not to exceed a period of two years from the date of dissolution.

            F.(1) Parties to a franchise may agree that:

            (a) The franchisor shall refrain from selling, distributing, or granting additional franchises to sell or distribute, within defined geographic territory, those products or services which are the subject of the franchise.

            (b) The franchisee shall:

            (i) During the term of the franchise, refrain from competing with the franchisor or other franchisees of the franchisor or carrying on or engaging in any other business similar to that which is the subject of the franchise.

            (ii) For a period not to exceed two years following severance of the franchise relationship, refrain from carrying on or engaging in any other business similar to that which is the subject of the franchise and from competing with or soliciting the customers of the franchisor or other franchisees of the franchisor.

            (c) The employee if employed by a franchisor shall:

            (i) During the term of his employment by the franchisor, refrain from competing with his employer or any of the franchisees of his employer or carrying on or engaging in any other business similar to that which is the subject of the franchise.

            (ii) For a period not to exceed two years following severance of the employment relationship between the franchisor and the employee, refrain from carrying on or engaging in any other business similar to that which is the subject of the franchise between the franchisor and its franchisees and from competing with or soliciting the customers of his employer or the franchisees of his employer.

            (2) Except as provided in Paragraph (3) of this Subsection, neither a franchisee who is a party to a franchise agreement regulated under the Federal Trade Commission Franchise Disclosure Rule, 16 CFR 436, nor an employee of the franchisee shall be deemed to be an employee of the franchisor for any purpose. A voluntary agreement entered into between the United States Department of Labor and an employer shall not be used by a state department or agency as evidence or for any other purpose in an investigation or judicial or administrative determination, including whether an employee of a franchisee is also considered to be an employee of the franchisor.

            (3) Pursuant to Chapter 10 and Chapter 11 of Title 23 of the Louisiana Revised Statutes of 1950, an employee of a franchisee may be deemed to be an employee of the franchisor only where the two entities share or co-determine those matters governing the essential terms and conditions of employment and directly and immediately control matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.

            (4) As used in this Subsection:

            (a) "Franchise" means any continuing commercial relationship created by any arrangement or arrangements as defined in 16 CFR 436.1(h).

            (b) "Franchisee" means any person who participates in a franchise relationship as a franchisee, partner, shareholder with at least a ten percent interest in the franchisee, executive officer of the franchisee, or a person to whom an interest in a franchise is sold, as defined in 16 CFR 436.1(h), provided that no person shall be included in this definition unless he has signed an agreement expressly binding him to the provisions thereof.

            (c) "Franchisor" means any person who participates in a franchise relationship as a franchisor as defined in 16 CFR 436.1(k).

            G.(1) An employee may at any time enter into an agreement with his employer that, for a period not to exceed two years from the date of the termination of employment, he will refrain from engaging in any work or activity to design, write, modify, or implement any computer program that directly competes with any confidential computer program owned, licensed, or marketed by the employer, and to which the employee had direct access during the term of his employment or services.

            (2) As used in this Subsection, "confidential" means that which:

            (a) Is not generally known to and not readily ascertainable by other persons.

            (b) Is the subject of reasonable efforts under the circumstances to maintain its secrecy.

            (3) As used in this Subsection, "computer program" means a plan, routine, or set of statements or instructions, including any subset, subroutine, or portion of instructions, regardless of format or medium, which are capable, when incorporated into a machine-readable medium, of causing a computer to perform a particular task or function or achieve a particular result.

            (4) As used in this Subsection, "employee" shall mean any individual, corporation, partnership, or any other entity which contracts or agrees with an employer to perform, provide, or furnish any services to, for, or on behalf of such employer.

            H. Any agreement covered by Subsection B, C, E, F, G, J, K, or L of this Section shall be considered an obligation not to do, and failure to perform may entitle the obligee to recover damages for the loss sustained and the profit of which he has been deprived. In addition, upon proof of the obligor's failure to perform, and without the necessity of proving irreparable injury, a court of competent jurisdiction shall order injunctive relief enforcing the terms of the agreement. Any agreement covered by Subsection J, K, or L of this Section shall be null and void if it is determined that members of the agreement were engaged in ultra vires acts. Nothing in Subsection J, K, or L of this Section shall prohibit the transfer, sale, or purchase of stock or interest in publicly traded entities.

            I.(1) There shall be no contract or agreement or provision entered into by an automobile salesman and his employer restraining him from selling automobiles.

            (2)(a) For the purposes of this Subsection, "automobile" means any new or used motor-driven car, van, or truck required to be registered which is used, or is designed to be used, for the transporting of passengers or goods for public, private, commercial, or for-hire purposes.

            (b) For the purposes of this Subsection, "salesman" means any person with a salesman's license issued by the Louisiana Motor Vehicle Commission or the Used Motor Vehicle and Parts Commission, other than a person who owns a proprietary or equity interest in a new or used car dealership in Louisiana.

            J. A corporation and the individual shareholders of such corporation may agree that such shareholders will refrain from carrying on or engaging in a business similar to that of the corporation and from soliciting customers of the corporation within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the corporation carries on a similar business therein, not to exceed a period of two years from the date such shareholder ceases to be a shareholder of the corporation. A violation of this Subsection shall be enforceable in accordance with Subsection H of this Section.

            K. A partnership and the individual partners of such partnership may agree that such partners will refrain from carrying on or engaging in a business similar to that of the partnership and from soliciting customers of the partnership within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the partnership carries on a similar business therein, not to exceed a period of two years from the date such partner ceases to be a partner. A violation of this Subsection shall be enforceable in accordance with Subsection H of this Section.

            L. A limited liability company and the individual members of such limited liability company may agree that such members will refrain from carrying on or engaging in a business similar to that of the limited liability company and from soliciting customers of the limited liability company within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the limited liability company carries on a similar business therein, not to exceed a period of two years from the date such member ceases to be a member. A violation of this Subsection shall be enforceable in accordance with Subsection H of this Section.

            NOTE: Subsections M, N, and O eff. Jan. 1, 2025. See Acts 2024, No. 273, §1.

            M.(1) Any provision in a contract or agreement which restrains a primary care physician from practicing medicine shall not exceed three years from the effective date of the initial contract or agreement. Any subsequent contract or agreement between the employer and primary care physician executed after the initial three-year term shall not include noncompete provisions.

            (2) If the contract or agreement provided for in Paragraph (1) of this Subsection is terminated by the primary care physician prior to the initial three-year term, the primary care physician may be prohibited from carrying on or engaging in a business similar to that of the employer in the parish in which the primary care physician's principal practice is located and no more than two contiguous parishes in which the employer carries on a like business. The parishes shall be specified in the contract or agreement. The prohibition authorized in this Paragraph shall not exceed a period of more than two years from termination of employment.

            (3) For purposes of this Subsection, "primary care physician" means a physician who predominantly practices general family medicine, general internal medicine, general pediatrics, general obstetrics, or general gynecology. For any other physician, the provisions of Subsection N of this Section shall apply.

            N.(1) For any physician other than a primary care physician as defined in Subsection M of this Section, any provision in a contract or agreement which restrains the physician from practicing medicine shall not exceed five years from the effective date of the initial contract or agreement. Any subsequent contract or agreement executed between the employer and the physician after the initial five-year term shall not include noncompete provisions.

            (2) If the contract or agreement provided for in Paragraph (1) of this Subsection is terminated by the physician prior to the initial five-year term, the physician may be prohibited from carrying on or engaging in a business similar to that of the employer in the parish in which the physician's principal practice is located and no more than two contiguous parishes in which the employer carries on a like business. The parishes shall be specified in the contract or agreement. The prohibition authorized in this Paragraph shall not exceed a period of more than two years from termination of employment.

            O.(1) The provisions of Subsections M and N of this Section shall not apply to the following physicians:

            (a) Any physician who is employed by or under contract with a rural hospital as provided for in the Rural Hospital Preservation Act, R.S. 40:1189.1 et seq.

            (b) Any physician who is employed by or under contract with a federally qualified healthcare center as defined in R.S. 40:1183.3 and which operates in a rural parish as designated by the federal Office of Management and Budget at the time that the physician is hired.

            (2) For any physician exempted in this Subsection, the provisions of Subsection C, J, K, or L of this Section shall apply.

            Acts 1962, No. 104, §§1, 2; Acts 1989, No. 639, §1; Acts 1990, No. 137, §1, eff. June 29, 1990; Acts 1990, No. 201, §1; Acts 1991, No. 891, §1; Acts 1995, No. 937, §1, eff. June 28, 1995; Acts 1999, No. 58, §1; Acts 2003, No. 428, §§1 and 2; Acts 2006, No. 436, §1; Acts 2008, No. 399, §1; Acts 2008, No. 711, §1; Acts 2010, No. 164, §1; Acts 2015, No. 404, §1; Acts 2020, No. 121, §1; Acts 2024, No. 273, §1, eff. Jan.1, 2025.